Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1887-04-15
DIRECTORS LIABLE.


| bert SOWlcS, Edward n. SOwleS. Oscar A.
Burton, bennett G. Hail. In Equity, f, De-
rlary term, 1887.
This bank W IS organized ana continued II.
| existence, with n capital stock of 100000,
under The laws of the Unit I'd States relating
| to National banks. 1t failed and stopped do
| ing busicess April &, 1884, and was soon after
placed in the hands of receiver. The de-
! PENDANTS, except Hall, Edward a. Sowes tie
! ing president, and Albert So. les cashier
were directors, with George w. Foster, now
deceased. after February II, 1850, rnd with II.
! tall since January II 1883 At the time of
the failure there were among the assets of the
bank large amounts of paper, in various
! forms, taken for loans and discounts to one
Marshall large amounts taken for loans and
discounts to Albert SOwles for his own use
ana for others for whom he was surety and
END rser; and to the amount of S;W,OI0 for
loans to Edward A. Sowes. The loans and dis
counts to Marshall to the amount of S35 3Os Is
ana al OF the others were made after Feb
I ruary IL, $780, and all were almost wholly
uncollectablc and valuelcss when the failure
came No dividends W re declared in 1850 or
in the first six months of 1851, and tie bank
had, Suly 4. 1881, surplus and surplus funds to
the amount Of $4,000, or thereaboutI. div
ldcnd OF SIX per cent was declared on
That day, another of the same amount No
vember |, another December s, one of per
cent July 4, 1852, one of 10 per cent December
D, ISS2, one of per cent May !, 1888, and one
of . per ceat November 6, 1888 all of which
were paid. Some OF these dividends were de-
clared when there were not sufficient assets.
IN view OF subsequent events to warrant
the defendants AZ directors with the losses to
the bank in consequence of these bad loans
and discounts, and with the amounts of these
dlNldends taken from its assets.
The directors all resided at st. Adams
wnere ne bank was Il Gated, except Burton
who resided at Burlington. The business of
the bank was managed principally by the
cash er, who was of large experience, able and
competent, and of good reputation, and, I'M
III near me Tune OF the failure, of con ider-
able veal tn. All the loans ana discounts were
approved of and made by shim, and he voted
Tor and concurred in all the dividends. The
increase of the debt of Marshall appears TO
have been accomplished by bills of exchange
drawn against existing values. and by the dis
count OF business paper owned by him to
Such an extent as mott TO be in violation OF any
express law Those who took part in it on be- |
half of the bank appear to have acted, in view
OF tne llaDltles he was already under to the |
bank, and of the condition of his business as
thcn understood by them, in good faith, and |
as they thought would be for the be-t inter |
ests OF the bank They had no interest with |
MN nor any apparent object to accomplish |
ny increasing his accommodations aside from |
taking the wisest course for the interests of |
the bank. AS these loans and discounts have |
resulted they were unwise and hazardous, |
looked back upon, but they are to be consid- !
cred as they could be looked forward to, and
not from the present standpoint. In this view
there is no just ground upon which any of the |
directors can be properly charged tor that |
debt; Scott VS.; DePeyster, ] fdw. CHI 5i3
Spering's Appeal, II, Pa. St. H. Thompson's |
liability of officers 2$3.
The loans 10 Albert Sowles and some of |
those Tor which he became liable as surety or |
endorser appear to have been in violation of |
the provisions of section 500, Rev Stat L. s. |
by which Liabilities OF any person to a nation |
al oahk Tor money borrowed in excess of one
tenth OF the capital stock are prohibited. |
None or the directors who are living and are |
defendants, Is shown to have knowingly par |
t,iiclpated IN or assented to any of the loans or
coults-constltuting the debts against him |
or those Tor which he is liable as surety or en- |
dorser.
The liability of Edward A. Sowles oripnot-
4 n hiDIg ftn. Eel
II, 1850, of $4,000 This loan was in excess OF |
onc-tenlh Of he capital stock, and in direct |
violation OF the provisions of section 52OG All |
those who were then directors, which includes |
all the defendants except Hall, knew of and |
assented to this loan. This is not disputed.
any national bank shall knowingly violate, or |
permit any officer, agent or servant to vio- !
!ate, any OF the provisions of that title,
leges and franchises of the bank shall be |
forfeited, and that in cases OF such violation
every director, who participated in or as
scented to the same shall be held liable in his |
personal and individual capacity for all dam
ages sustained IN consequence of such viola
ton; BY force of these provisions the de-
lendantS, Albert SowloS and Burton, by their |
in and assent to this loan be.
came liable to the bank as now represented by !
1t. The loan was made to Edward A. Sowles,
he procurei it III his own b. half. and became |
liable as debtor for it; he would not appear
TO be liable as participating in or asserting 10 |
II on behalf OF the bank. United States vs. |
Brtton, 10S U S. 1873
TINS bin is not brought to charge the de-
PENDANTS Tor money received by them as
for dividends, but tne losses to |
the bank itself from unlawfully or wrongfully |
declaring dividends. BY section 5204 divi- |
bends to II greater amount than net profits
alter deducting losses and bad debts are pro-
hib ted and debts on which interest is past
due and unpaid for six months, unless well |
secured ana IN process of collection, are de-
hncd TO be bad bebts. The assets of this bank
dld not so consist of bad debts Wi hin this
definition, at he time, when they were made
as to make the dividends improper. There
were debts which werd in fact bad in the re-
SUIT 10 an extent SO great as to wipe out the |
profits from which dividends could be made !
when the later ones were declared. The de- |
lendant Burto Is not shown to have particle |
paied in making the dividends. Those who |
did lsjudged as to the value of the assets |
ms evidence does not warrant the conclusion |
that they took this method Of dividing the |
assets or the bank among themselves when |
they knew that dividends could not properly |
he mace. 1t is not considered, therefore, that |
the defendants are liable for the amount of |
the dividends because they were unlawfuly |
or wronglully declared. Whether those |
who received the dividends are chargeable for |
the amount received on the ground that the |
money from which they were paid was need
ed to pay the liabilities of the bank is ques.
tlon not presented IN this case. Spering's ap- |
peal, before cited. Thompson on liability 35l |
United States vs, Britton los U. S. 49,
IL Is strongly urged that the defendants are |
Maple at common law for inattention to duty |
as directors. although not liable under the ex
binCSS iiON VI lHt STATUTES menuNned-
This ground of liability is not applicable. !
10 the Marshall debt, for the circumstances of |
the increase of that debt are such that those |
VINO participated in ii are not found to be |
habe. A tOrtiOri those who did not participate
are not liable tor that. If there is any llabll- |
lty in this behalf it must arise upon the man
ner OF the loans to Albert Sowl5s ana those
Tor winch he became liable, and for some
smaller loans TO Edward A. Sowles, and to
some Others of which he became liable. There
were some of these Latter for which the de-
iendant burton became liable as surety or
endorser, and from which he has become dis
charged in the course OF the receivershp. He
was and always has since been amply good
Tor these liabilities and none OF the directors
incurred any liability for negligence in trust
ing TO his solve ncy. This question is narrow
ed down to whether the defendants Burton
ana Edward A. Sowes and Hal are liable Tor
the loans on which Albert Sowles is liable,
ana which were made to him, because they
dld not prevent these loans.
The question as to the liability of directors
OF national banks for mere inattention was
much considered In MOvius, Receiver, VS..
Spaulding and others, directors, in the north
ern district of New York lately decided. 1t
was there held that directors were not liable
Tor the acts of their associates in which they
mad no part, and of which they had no knOwl.